Qualified fee estate

Key Takeaways

• A qualified fee estate is a fee simple estate limited by a stated condition or event. It is also called a conditional fee estate or a defeasible fee estate.
• The holder of a qualified fee has the full bundle of ownership rights while the condition holds, which keeps it a freehold estate rather than a lesser interest.
• A fee simple determinable ends automatically the moment the stated event occurs, while a fee simple subject to condition subsequent ends only if the grantor acts on a right of entry.
• In Washington, a deed condition or reverter that limits use or occupancy on the basis of race, disability, or another protected class is void under RCW 49.60.224, and honoring it is an unfair practice.

What It Means

A qualified fee estate is ownership with a string attached. It is a Fee Simple estate, so the holder has the full bundle of rights and can sell, mortgage, or devise the property, but the grant carries a condition or a triggering event that can end the ownership. Because it can be defeated, it is also called a defeasible fee, and the course uses conditional fee estate for the same thing.

The plain version of ownership is fee simple absolute, which carries no strings. Everything else in the fee family is qualified in some way, and the two named forms differ in how the ending works. A fee simple determinable ends by itself the instant the stated event occurs, and title returns to the grantor with nobody having to do anything. A fee simple subject to condition subsequent does not end by itself. The grantor keeps a right to reenter and retake the property, and until the grantor exercises it, the current owner still holds title.

Both forms are Freehold Estate interests of potentially indefinite duration, which puts them on the same shelf as fee simple absolute and the Life Estate (our guide to life estates covers that neighbor), and well above any leasehold.

How It Works in Washington

Washington creates a qualified fee the same way it creates any other interest in land, through the deed. RCW 64.04.010 requires that every conveyance of real estate, or any interest therein, and every contract creating or evidencing any encumbrance upon real estate, shall be by deed. RCW 64.04.020 requires every deed to be in writing, signed by the party bound thereby, and acknowledged by that party before a person authorized to take acknowledgments of deeds. The condition that qualifies the fee lives in that deed language, and because it sits in the recorded chain of title it reaches later owners too.

Washington then puts a hard limit on what the condition may say. RCW 49.60.224(1) voids every provision in a written instrument relating to real property that purports to forbid or restrict the conveyance, encumbrance, occupancy, or lease of the property to individuals of a specified race, creed, color, sex, national origin, citizenship or immigration status, sexual orientation, families with children status, honorably discharged veteran or military status, or disability. The statute names the defeasible fee machinery directly: every condition, restriction, or prohibition, including a right of entry or possibility of reverter, that limits use or occupancy on those grounds is void. RCW 49.60.224(2) makes it an unfair practice to insert such a provision or to honor or attempt to honor one in the chain of title, which is the same rule that kills a discriminatory Restrictive Covenant. RCW 49.60.227 then gives owners, occupants, tenants, and homeowners' association boards a declaratory judgment action to strike the void language from the public record. A licensee who finds an old racial condition in a title report does not enforce it, does not repeat it in marketing, and points the owner to that process. Our guide to estates in land places the whole fee family in order.

Example

Harold Pace deeds a 3.4 acre parcel in Walla Walla to the Blue Mountain Historical Society for $1. The deed reads that the property is conveyed so long as it is used as a public museum, and that if it ceases to be used as a public museum the property reverts to the grantor or his heirs. That is a fee simple determinable, one form of qualified fee estate. The Society owns the land outright, pays the taxes on it, and could mortgage it, but the entire ownership hangs on the museum use.

Eleven years later the Society closes the museum and leases the building to a coffee roaster for $3,200 a month. Because the deed used so long as language, the estate ends on its own the day the museum use stops, and title returns to Harold's heirs without a lawsuit. Change one phrase and the outcome changes. Had the deed said the conveyance is on the condition that the property be used as a public museum, and that the grantor may reenter and terminate the estate if it is not, the heirs would hold only a right of entry, and title would stay with the Society until they acted on it.

Common Mistakes and Exam Traps

• Qualified fee, conditional fee, and defeasible fee are three names for the same estate. A question offering all three as separate choices is testing vocabulary, not law.
• Fee simple determinable ends automatically when the event happens. Fee simple subject to condition subsequent ends only if the grantor exercises a right of entry, so the current owner keeps title until that happens.
• A qualified fee is still a freehold estate of potentially indefinite duration. It is not a leasehold and it is not a life estate, even though all three can come to an end.
• A condition in a Washington deed that limits occupancy by race or another protected class is void under RCW 49.60.224, so it cannot trigger a reverter no matter how the deed is worded.